CFO’s: Financial and Strategic Competitive Advantages In Intangible Assets

Michael D. Moberly  January 10, 2011

In today’s increasingly knowledge (intangible asset) based business economy, company’s that possess the inclination and ability to achieve long term and sustainable success must recognize that a key pillar to that success lies in (a.) developing, and (b.) sharing internally, information and data about the performance of the intangible assets they develop and possess.

But, this post is not about quick fixes or silver bullets though, as there’s nothing particularly new, nor necessarily quick, about…

– searching for competitive and financial advantages that can help put and keep a company on the leading (competitive and financial) edge of their industry and/or market space, or

– trying to better understand and develop practical and measurable ways to improve the financial and competitive health of a company.  

What may be new or innovative for some though, lies in the premise of a 2007 Deloitte survey which states (paraphrased) that…financial indicators coming from conventional balance sheets and financial statements alone, neither capture nor characterize a company’s (competitive, financial) strengths and weakenesses internally or within its value-supply chain.  

It’s simply imperative that more management teams and boards recognize that relying solely on conventional balance sheets and/or financial statements to supply the ‘complete picture’ and the necessary strategic perspective to compete effectively is inadequate, if it does not include intangibles.  In other words, competitive stagnation and missed opportunities can flow from a company’s exclusive reliance on conventional financial statements as the primary information source for their strategic planning and outlook.  

To spark dialogue with CFO’s, management teams, and boards to engage this perspective, I use several dialogue initiators.  One, is revisiting the adage attributed to Dr. Deming, ‘you can’t manage what you don’t measure’.  As we all know, value and revenue drive the markets and, by extension, most company’s destiny.  So, when 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and future wealth creation evolve directly from intangible assets, as they do today, management teams and boards would be well served to devote the necessary time and energy to developing defensible approaches to measuring and managing (a.) which, and (b.) how intangible assets are performing in their company and relative to their competitors!

A second dialogue initiator I use, is discussing the actual content and rationale of my training for CFO’s and other members of a company management and leadership team.  The foundation of the training includes creating and elevating operational familiarity and (business) confidence about intangible assets.  Within that dialogue, attention is brought to…

1. what intangible assets are, what they aren’t, where they’re located, and how to assess their status and contributory value,

2. strategies for utilizing, measuring, and extracting value from intangibles, and 

3. what constitutes effective stewardship, oversight, and management of a company’s intangibles.

These dialogue initiators prompt most CFO’s and management teams to (a.) consider how they can become better positioned, from a business perspective, to actually deliver a more financially and competitive advantage healthy company, and (b.) become more favorably inclined to…

–  ask more questions and demand more answers about the performance of their company’s intangible assets, and

–  drill down far enough (companywide) to determine precisely what asset performance indicators their company should be measuring.

Admittedly, some of the existing intangible asset performance – measurement methods (tools) need some refinements to confidentally and objectively paint the complete picture of a company’s financial and competitive advantage health that’s so necessary today, e.g.,

1. the actual tools (techniques, formulas, measurement points, etc.) need more internal-external reliability and validity testing to become more defensible and mitigate skepticisms about their relevance and use.

2. overcoming the often repeated mis-perceptions that measuring intangibles is too time consuming and doesn’t deliver a timely return-on-investment. 

3. addressing the relevant concern that developing and sharing intangible asset metrics, internally, or otherwise, could potentially make a company more vulnerable – at risk to competitive advantage undermining and/or asset value erosion, etc., should competitors acquire that information.

Ultimately, in my view, it’s the CFO who, in most instances, should take the lead in stewarding, overseeing, and managing a company’s intangible assets.  But, that must be premised on:

1. getting the correct information/data to the CFO.

2. the CFO being receptive to and confident in that information/data, and

3. the CFO recognizing how to effectively utilize and execute on that information/data to achieve the desired results.

(This post was inspired by a 2007 survey/report produced by Deloitte titled ‘In The Dark II: What Many Boards and Executives Still Don’t Know About The Health Of Their Business’.)

The ‘Business IP and Intangible Asset Blog’ is researched and written by Michael D. Moberly, president and founder of Knowledge Protection Strategies – https://kpstrat.com.  The intent of Mr. Moberly’s blog is to provide insights and perspective to aid in a cross-disciplinary approach for identifying, assessing, valuing, protecting, utilizing, and extracting value from intangible assets.  Your comments regarding my blog posts are welcome at [email protected]

While visiting my blog, you are encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry about consulting, conducting an assessment, training program, or speaking engagement to your company or professional association at 314-440-3593.

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 

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